Cube's always had excellent technology but bad marketing. The following is what worries me most about Cube. I hope this changes with Umesh.
redherring.com
That can be important in determining which company has the strategic position in the supply chain. Case in point: C-Cube Microsystems (Nasdaq: CUBE) of Milpitas used its digital video expertise to create the first digital video chips for karaoke machines in the mid-'90s. C-Cube sold its chips to Sony, Matsushita, and many other Japanese electronics makers to prime the market. Then C-Cube armed Chinese manufacturers, who proceeded to undercut the Japanese. "We had the right intellectual property at the right time," says Alex Balkanski, former CEO of C-Cube and now a venture capitalist at Benchmark Capital. "With so much talent in Silicon Valley, we moved at speeds that were impossibly difficult for the Japanese."
But C-Cube's story also shows how hard it is to keep an intellectual property advantage over the big consumer electronics companies. In the latest TiVo boxes, Sony uses its own video chips rather than C-Cube's. "Ultimately, C-Cube didn't manage its customers right, and those customers vowed to escape," says Richard Doherty, director of research of the Envisioneering Group, a consulting firm.
Other U.S. companies have learned the hard way that the big electronics conglomerates will do everything in their power to avoid being locked into somebody else's architecture, as the PC industry was with Wintel. Like C-Cube, U.S. firms like 3DO (Nasdaq: THDO) and VM Labs once had grand ambitions, and they have faltered in trying to usurp leadership of video games and DVD players, respectively. |
